The UK economy expanded by 0.3% in June and 0.4% in the second quarter, putting the country on track for the fastest growth among G7 advanced economies in the first half of 2026. The figures, released by the Office for National Statistics, follow a downward revision to public borrowing data for May and June, which the ONS reduced by a combined £7.5 billion.
Services sector activity, measured by S&P Global’s PMI, rose to 52.8 in August from 52.1 in July, the highest level in six months. Retail sales volumes, excluding automotive fuels, fell 0.9% in July but remained 4% higher than a year earlier, the strongest three-month growth in five years. Consumer confidence, tracked by GfK, climbed to -14 in August from -17 in July, reaching its highest point in two years.
Inflation pressures persist, with consumer price growth expected to exceed 3% in the coming months. Public borrowing for the first four months of the 2026/27 financial year is running a couple of billion pounds above official projections, according to the budget forecaster. Manufacturing order books reached their highest level since November 2024, while major purchase sentiment hit its strongest since December 2021.
Prime Minister Andy Burnham’s first budget, scheduled for October, will be shaped by these developments. John Healey, the newly appointed Finance Minister, faces a mixed outlook: stronger growth and confidence indicators contrast with elevated inflation and higher-than-projected borrowing. Thomas Pugh, chief economist at RSM, noted the risk of shifting from resilience to a more robust performance this year.
